So if shopping MMs for a very promising meme/utility project listed on Base, who are those you recommend pursuing? And which CEXs should be prioritized starting with maybe a tier 3 like BitMart, then tier 2 like gate.io or okx? It’s my understanding most MMs can be rather ineffective and many of the CEXs have basically fake TV. Thanks for a great another great post.
> “market maker will maintain bid and offer prices”
Wait, so someone can intentionally manipulate the price of something? And this is considered ok?
Pardon my finance ignorance, but how is this not “price fixing” or “market manipulation” or other fun pejoratives? I mean someone controls the price of something and sets it to whatever they want? And they can rugpull any time by removing their “market making” or spike the price to any value they want?
Ok maybe if the “market maker” is completely algorithmic and autonomous and the algorithm is published ahead of time so that all market participants know ahead of time then maybe I could see how this could be considered legit.
Market Makers don't "maintain bid and offers" at a certain price level like I think you are implying. What they do is "maintain the tightness of a bid and offer" so that the spread is a couple cents instead of a dollar for example. If there are 10x the amount of buyers out there than sellers in a token, the price will still skyrocket up, the MM will just try to buy/sell really fast to capture the alpha within the spread as the market is moving up, hence why good MMs need not only good statistical modeling, but also they need to be very very fast. So it is not "price fixing" like you say, because the market maker isn't responsible (or stupid enough) to attempt to hold a price at a certain level (remember how Caroline got train-wrecked trying to hold FTT @23?). It is often described as a game of picking up pennies in front of a steam roller, because if you are not careful and fast, you will get run over, which could wipe out a week/month/etc in profits.
This activity is "legit" because the the market maker takes principal risk here and if they're not good they get run over.
in the agency case that the article describes, the token projects are very specific on their needs, i.e. how many exchanges? how many books (COIN/USD, COIN/USDC, COIN/ETH, etc) per exchange, how many spots per book (.01bps, .03bps, .05bps, etc....) that the market maker is required to hold a contracted amount of tokens at. So here there is also not a good way for a MM to manipulate without risk.
Iguana - while unrelated to the post, do you still feel strong about ETH at $6,500 end of this year / early next year?
I think we can probably hit $4,800 within the next 12 months. ~80% confidence.
So we are down from 8,000 to 6,500 to 4,800 haha! I really hope things turn following the ETH ETF.
So if shopping MMs for a very promising meme/utility project listed on Base, who are those you recommend pursuing? And which CEXs should be prioritized starting with maybe a tier 3 like BitMart, then tier 2 like gate.io or okx? It’s my understanding most MMs can be rather ineffective and many of the CEXs have basically fake TV. Thanks for a great another great post.
> “market maker will maintain bid and offer prices”
Wait, so someone can intentionally manipulate the price of something? And this is considered ok?
Pardon my finance ignorance, but how is this not “price fixing” or “market manipulation” or other fun pejoratives? I mean someone controls the price of something and sets it to whatever they want? And they can rugpull any time by removing their “market making” or spike the price to any value they want?
Ok maybe if the “market maker” is completely algorithmic and autonomous and the algorithm is published ahead of time so that all market participants know ahead of time then maybe I could see how this could be considered legit.
Market Makers don't "maintain bid and offers" at a certain price level like I think you are implying. What they do is "maintain the tightness of a bid and offer" so that the spread is a couple cents instead of a dollar for example. If there are 10x the amount of buyers out there than sellers in a token, the price will still skyrocket up, the MM will just try to buy/sell really fast to capture the alpha within the spread as the market is moving up, hence why good MMs need not only good statistical modeling, but also they need to be very very fast. So it is not "price fixing" like you say, because the market maker isn't responsible (or stupid enough) to attempt to hold a price at a certain level (remember how Caroline got train-wrecked trying to hold FTT @23?). It is often described as a game of picking up pennies in front of a steam roller, because if you are not careful and fast, you will get run over, which could wipe out a week/month/etc in profits.
This activity is "legit" because the the market maker takes principal risk here and if they're not good they get run over.
in the agency case that the article describes, the token projects are very specific on their needs, i.e. how many exchanges? how many books (COIN/USD, COIN/USDC, COIN/ETH, etc) per exchange, how many spots per book (.01bps, .03bps, .05bps, etc....) that the market maker is required to hold a contracted amount of tokens at. So here there is also not a good way for a MM to manipulate without risk.
Hopefully this makes a bit of sense.
Doesn't cow swap run on coincidence of wants, and still provide competitive pricing?
Or does that only work for tokens with a certain amount of demand?